CHICAGO -- A $450 million bond-financed plan to build a new hockey arena near downtown Detroit advanced Tuesday when the Detroit City Council agreed to transfer 39 acres of public land to the project's developer.
The plan is key to a larger, $650 million plan that includes a 45-block entertainment to be anchored by the new arena for the Detroit Red Wings. The council agreed to transfer city land with a value estimated at $2.9 million to the Detroit Downtown Development Authority for $1.
The project has sparked major criticism in the bankrupt city, and the council moved its Tuesday morning meeting to an auditorium to accommodate the large crowd that showed up ahead of the vote.
The body approved the controversial measure by a 6-3 vote after listening to two hours of public comments that ranged from positive to critical.
"It's better than what sits in that space now, which is nothing," Council member Saunteel Jenkins said. "So I'm ready to move forward on this."
The Michigan Strategic Fund will issue the bonds. No current city money will back the debt, which will be paid by tax-increment financing revenues and the private developer.
Supporters, including Detroit Mayor Mike Duggan and Michigan Gov. Rick Snyder, say the project will bring badly needed economic development to a swath of largely deserted land adjacent to Detroit's downtown. Supporters contend the project will create 13,000 jobs and inject $1.8 billion into the local economy and state.
The area could draw in up to six million people to the area a year, Tom Wilson, the CEO of Olympia Entertainment, which is developing the deal, said at Tuesday's meeting. Olympia is an arm of Ilitch Holdings Inc., which owns the Red Wings, the Little Ceasars pizza chain, and the Detroit Tigers baseball team.
Wilson called it a "once-in-a-generation opportunity."
Critics say city should not be diverting already thin property tax dollars to subsidize what will essentially be a private arena and that sports stadiums typically fail to generate the type of new revenue touted at the outset.
In December, the council approved expanding the DDA's existing 615-acre boundaries by 40 blocks to include the project site and amended its tax-increment financing authority to include the project. Those measures laid the groundwork for the public financing component. It delayed a vote, however, on transferring the land amid concerns that there were no guarantees that Detroiters would be given job priority.
"Do I still say that we need a guarantee for some jobs for Detroiters once this stadium is built?" asked council President Brenda Jones, who voted against the measure. "I'm not going to change my mind on that."
The developer hopes to have the hockey arena ready for the 2016-2017 season.
Under the plan, the state would demolish the Joe Louis Arena, on the city's riverfront, where the Red Wings currently play. Backers predict the arena would draw up to 50 other events every year in addition to the Red Wings' 41 regular season games plus playoffs.
The financing has been months in the making and required state legislation that allows the DDA to use up to $15 million incremental property tax revenue generated in the district.
The Michigan Strategic Fund approved the sale of $450 million of 30-year private activity bonds in July, just days after Detroit filed its historic Chapter 9 bankruptcy petition.
The financing plan relies on $365.5 million of private funding and $284.5 million of public funds.
The bonds would be backed by a pledge of the downtown development authority to set aside for debt service at least $12.8 million but not more than $15 million a year. The DDA pledged to contribute up to $62 million over 30 years in revenues in addition to those pledged for the bonds to support the additional projects.
The development authority would own the new arena and Olympia would operate it for 35 years, with 12 five-year renewal options.
Wayne County in late 2013 approved an agreement with the DDA that sets aside a piece of the county's property tax for bond debt service. Olympia would also pay $2 million annually into a capital improvement fund, and be responsible for any cost overruns.